Accounting Ledgers in Goods and Service Tax

May 16, 2019Alankit

As we head towards new financial year, it is the right time to make certain changes to the accounting systems if not done so far as it will help in the filing of the new returns to be introduced, Annual Return and GST Audit Report.

There should be different ledgers for tracking the liability, recovery or interim recovery under GST else it will be a challenge. Say for example if there is only one account of GST liability account, then it will be a challenge to reconcile the same and state separately for the transactions related to the interstate, stock transfer or for reporting of purchases from unregistered taxpayers or advance received.

We will see the major/important ledgers / Chart of accounts to be created in the accounting software or ERP. There is a requirement of reporting under GST at granular level in various returns.

Alankit recommends to maintain ledger accounts based on nature of transactions, taxes and tax rates.
It is also recommended to maintain separate ledgers for inward supplies of input, input services, capital goods, import of goods and import of services as per the requirement.
If you have multiple registration within the same state maintain separate ledgers for intra state transactions.
Further maintain other ledgers Eg. Refunds etc as per the requirement.

Outward Supplies – Within the State
These accounts will be used for tracking Outward supplies i.e., sales within the state. These accounts have to be created separately for goods and services as we have a requirement to show them separately basis on the format of GSTR – 1 return.
Outward Supplies – B2B (table 4)
Outward Supplies – B2C (table 7)
If required can also have separate ledger accounts for B2C large, that is for supplies to unregistered
taxpayers where the invoice value is more than Rs 2.5 Lacs.

GST on Advances
As per the provisions of the Time of Supply in Sections 12 and 13 of the CGST Act 2017, GST liability has to be paid on receipt of advance from the customers for services. To track the liability of such advances it has to accounted separately and the same can be reconciled on a monthly basis in Table 11A of the GSTR – 1 and for issue of the receipt voucher and while returning the advances to the customers wide refund voucher which will be adjusted in table 11(B) of the GSTR – 1.
· GST on Advances – CGST A/c
· GST on Advances – SGST A/c
· GST on Advances – IGST A/c
· GST on Advances – UTGST A/c
· GST on Advances – GST Cess A/c

ITC – Interim Recovery Account
These accounts are to be created in case if the organization decides to take input tax credit only on updating in the Electronic Credit Ledger Account, this will give full control and information on which invoices input tax credit is not availed. Moreover, it helps the management in follow up and in decision making process also. This option would make sense in case of matching of suppliers and recipients returns. Though it may have some stress on the working capital it will ensure that there is no requirement of paying interest in case if the supplier of goods or services does not file the return and also safeguard the compliance ratings as and when introduced.
· ITC Interim Recovery Account – CGST A/c
· ITC Interim Recovery Account – SGST A/c
· ITC Interim Recovery Account – IGSTA/c
· ITC Interim Recovery Account – UTGSTA/c
· ITC Interim Recovery Account – GST Cess A/c

Input Tax Credit – Reversal Account
As per the provisions of the GST, the input tax credit availed if the supplier of the goods and services or both is not paid within 180 days, the input tax credit availed has to be reversed along with interest. In such cases when the input tax credit account is reversed, it will be parked in this reversal account. The input tax credit can be availed only as and when the supplier of goods or services or both is paid subsequently. These accounts have to be maintained at the registration number level i.e. at the state level in most of the cases.
· ITC Reversal –CGST A/c
· ITC Reversal –SGST A/c
· ITC Reversal –IGSTA/c
· ITC Reversal –UTGSTA/c
· ITC Reversal –GST Cess A/c

ITC – GST Interest Payable Account
On the one hundred and eighty first day the input tax credit has to be reversed along with the Interest has to be paid at the time of reversal of input tax credit, and for an accounting of the same, this account will be used.
· GST ITC Interest Payable Account – CGST A/c
· GST ITC Interest Payable Account – SGST A/c
· GST ITC Interest Payable Account – IGSTA/c
· GST ITC Interest Payable Account – UTGSTA/c
· GST ITC Interest Payable Account – GST Cess A/c

ITC – GST Interest Interim Account
The amount of interest paid on the one hundred and eighty first day will be reversed as and when the supplier of the goods or services or both is paid back. Until the point of time the supplier is paid, the same is parked in the interest interim account. Based on the accounting package or ERP a new ledger account can be created or the option of using the DFF or GDF in Oracle Applications or any other name whatever it is called.
· GST ITC Interest Interim Account – CGST A/c
· GST ITC Interest Interim Account – SGST A/c
· GST ITC Interest Interim Account – IGSTA/c
· GST ITC Interest Interim Account – UTGSTA/c
· GST ITC Interest Interim Account – GST Cess A/c

The above accounts have to be created for each registration number in case if you have a presence in more than one state. In case if you are using any ERP, you can explore the usage of the sub-ledgers or whatever name you call it at the account level.